Not just any broiges. An M&S broiges

To mark the 125th anniversary of Marks & Spencer, executive chairman Sir Stuart Rose commissioned a glossy “coffee table” history, replete with accounts of the retailer’s innovations down the decades.

Fascinating is the section at the back, with pen portraits of M&S leaders down the decades. In the century from 1894 to 1999, when Sir Richard Greenbury stepped aside, there are just seven names. In the following decade, the company has consumed, and in some case spat out, a further seven names. The transition from family company — dominated by the Marks and Sieff families — to a more conventional corporate governance has been marked by turmoil and strife at the top, and tens of millions of pounds of shareholders’ funds have been paid out in fees for loss of office.

One might have thought that by now the squabbling M&S board had learnt its lessons and put in place a smooth succession process. No chance. Once again, at a time when efforts ought to be devoted to maintaining market share in the slump, the directors are fighting like ferrets in a sack. The origins of the current dispute date back to 2006 when (Lord) Paul Myners (now City Minister) was forced off the board after a bitter dispute with another former non-executive director, Kevin Lomax.

Together, Mr Myners and Sir Stuart, the chief executive, had fought off the takeover challenge from retail supremo Sir Philip Green, rebuilt the M&S brand and helped to restore profits to £1 bn a year — a level last reached in Sir Richard’s final year of 1999-2000.

Mr Myners was succeeded by former Treasury mandarin Lord Terry Burns, who was not was a seasoned retailer. When Lord Burns stepped down two years later, Sir Stuart, to great controversy, grabbed both jobs to become executive chairman — in direct contravention of corporate governance guidelines. It sparked a row with shareholders, some of whom have never forgiven him.

Sir Stuart has publicly committed to finding a replacement for himself as chief executive by the annual general meeting in July 2010, and then leaving once a new chairman is in place. All this seemed to have been accepted by investors, despite the fact that Sir Stuart dumped two of the more promising executives he had recruited, most recently Carl Leaver.

But at M&S, where every boardroom cough reverberates around the City, nothing stays calm for long. Three things have disturbed the peace.

Firstly, financial performance has been bitterly disappointing, with profits falling 40 per cent last year. Secondly, despite this, the remuneration committee decided to give Sir Stuart, his marketing director Steve Sharp and a number of other executives generous incentives which did not meet governance standards. Blame for this has been placed on Lady Patten, head of the pay committee and, in response, Sir Stuart refused share options potentially worth £1m.

The third problem is the ambition of Sir David Michels, the former Hilton boss and currently M&S’s deputy chairman and senior non-executive. When Sir Stuart became executive chairman, it was agreed that the firm would have an all-powerful deputy to offer a counter balance to Sir Stuart’s power. Sir David would also lead the search for Sir Stuart’s successor.

The waters were muddied when Sir David let it be known that he would quite like to be chairman — compromising his own position as an honest broker. Sir Stuart does not favour Sir David stepping up, despite support for Sir David among activist investors from the local authority pension funds. These simmering disputes have come to a head as soundings have started on finding an external successor to Sir Stuart as chief executive. The company feels it needs to test the market and see who is available before deciding who should get the top job.

All of these problems have created severe unease among M&S investors. One shareholder group, PIRC, is calling for Sir Stuart to step down as chief executive immediately. Other shareholders are reportedly frustrated with both the succession struggle and operational issues. This disquiet could boil over at the AGM. Several investor groups have indicated that they intend to vote against the remuneration of directors.

Such a protest vote could be damaging and speed the transition to the next generation of executives. What is clear is that within the next 12 months there will be two new names to add to the list of bosses who have served since 1999. M&S risks earning an epithet as having the most dysfunctional governance structures in the FTSE100 index.